Visa, a world leader in digital payments, is stepping up payment protections for small businesses to fight ‘first-party fraud’ (when a customer claims a legitimate purchase is fraudulent) as new research reveals that 9 out of 10 small businesses (93%)[2] have reported an increase in this type of fraud over the last 12 months.
Meanwhile, Visa data reveals up to 20% card charge disputes experienced by businesses could be first party fraud. [3] This means consumers are disputing purchases and claiming transactions for services or goods are fraudulent when they did in fact receive them. Examples range from a gym-goer who forgets to cancel a membership, a child making a purchase on their parent’s device, a billing description looking unfamiliar, to customers claiming they have not received their orders, or it has arrived damaged.
Mandy Lamb, managing director of Visa UK and Ireland commented: “At Visa we are committed to tackling fraud to help everyone pay and be paid with confidence.
“Small businesses are the beating heart of both the UK economy and our local communities. We recognise their vital importance and that’s why we are constantly evolving our protective solutions. These new measures will help to ensure small businesses can conduct business safely and securely whilst maintaining the high level of customer protection through Visa’s Zero Liability Policy.
“Fraud, in all guises, is a persistent threat that undermines trust in our financial systems, impacting businesses, individuals and livelihoods. Everyone loses with fraud, which is why it’s everyone’s responsibility to tackle the problem head on, and why we’re doing all we can to support businesses impacted by the problem.”
The new framework introduced, Visa Compelling Evidence 3.0 (CE3.0), gives businesses more ways to show a disputed charge is valid and authorized by the cardholder, providing merchants with an additional level of protection while not impacting the consumers that are making genuine claims.
CE3.0 now allows businesses to provide records of two previous undisputed transactions using the same payment method. These transactions must be between 120 days and 365 days old as of the dispute date and either the IP address or the device ID/fingerprint must match across all three transactions, along with one additional element of IP address, device ID/fingerprint, shipping address or account log in ID. With this additional evidence that demonstrates the validity of the disputed charge, businesses may then be able to keep the money received from the original transaction.
These changes are an important part of Visa’s strategy to fight all types of fraud across its network and protect businesses. Meanwhile, over three quarters (78%) of respondents said that they knew where to access advice and support when combatting first-party fraud. The most popular places to go for advice were:
- Bank (57%)
- Credit card provider (50%)
- Consumer organisations such as Citizens Advice (48%)
At the same time, Visa’s strong customer protection through its Zero Liability Policy means customers will not be held responsible for unauthorised or fraudulent charges made with their Visa credentials[4]. They could also get their money back when they genuinely don’t get what they have paid for, where the seller won’t refund.[5]
Violeta Stevens is the Managing Director of Union Hand Roasted Coffee based in London and has also been directly impacted by this rising tide of first party fraud. She said: “It’s not just the financial impact that takes its toll, there is a lot of unseen time and admin on the side of the business that goes into these disputes/claims. We’ve seen customers claiming that products are damaged, which means we have to spend the time checking through our systems and sending a replacement, with no evidence that the products are definitely damaged. Likewise, we also have experienced people claiming that they simply haven’t received any coffee, when we know the coffee has been sent straight away after their order.”
Gordon Errington is the founder and Managing Director of Action Replay Sports, as well as the owner of overseas holiday properties. Gordon has experienced problems with first party fraud at both of his businesses, despite how different they are. He said: “As a business owner, I’ve experienced the problem from two different sides. With my sports retail business, unless we are willing to pay extra for all the proof of postage options, we end up in a situation where people are saying they didn’t receive goods, which is obviously hard for us and has an impact.
“For my buy to let properties overseas, the problem people have is they overspend when they’re away, return home, look at the size of their bill and decide they can’t afford it. This is when they start to try and claim part of it back. They don’t say anything while they’re there and are quite happy with everything, it’s only when they return home that there’s an issue. They’re not always looking for the full amount, but there are people out there who do it.”
